エンベデッドファイナンス、規則案1033、生成AI：MONEY20/20 2023の要旨
I came back last week from my annual pilgrimage to Money20/20 in Las Vegas, as always jetlagged, but energized and inspired by all the conversations and meetings I had. Thank you to everyone who shared your precious time with us! Of course, the event is too big for any one person to absorb everything, so as usual, we had several of us on the ground – this year it was Alenka Grealish, Bret Heither, and Mike Bernard – each coming back with perhaps slightly different takeaways.
The event last year was pivotal in encouraging me to dive deep into credit cards-as-a-service market and better understand the capabilities of next-gen card processors. Now, having published two major reports (The Siren Song of Credit Card-as-a-Service: In Search of a Breakthrough Opportunity in the US Market and Next-Gen Card Issuer Processors in the US: Ready to Capture Credit Card Opportunity?), I enjoyed catching up again with many players in this space. Incidentally, if you are not a client and can’t access our reports in full, you can get a sneak peek by downloading an excerpt with Zeta’s detailed profile, which was licensed for broad distribution.
Another of my interests is on customer identity and authentication, and I had several illuminating conversations in this area. While we wait for solutions that deliver us true digital identity, many players continue to enhance their capabilities to help banks verify customer identities and manage identity and fraud risks throughout the lifecycle.
However, it was three topics that stood out for me this year.
Banks seeking to reclaim leadership in BaaS and Embedded Finance
The first wave of BaaS and Embedded Finance market in the US was built around three core layers – the fintech/ non-bank brand looking to offer financial services to the end customer, the bank sponsor/ license holder, and the entity in the middle, providing the technology connectivity layer, but also additional services around “program management”, often taking on the responsibility of assessing the client risk and ensuring compliance on behalf of the sponsor banks. However, in the last 12 months, there has been an increased regulatory focus on such relationships with the regulators warning banks, from Blue Ridge to Goldman Sachs, to strengthen their fintech risk management practices. We’ve also seen some of the “middleware” players falling out with their banking partners (e.g., Synapse and Evolve), while others got acquired (e.g., FIS buying Bond).
The result is that we see a growing desire from banks to enable embedded finance offerings by having more direct relationships with fintechs/ non-banks. Many banks we spoke to, such as JP Morgan, Green Dot, Synovus with Maast, National Bank of Canada, and others, have been building out their capabilities to support embedded finance – both technology as well as fintech management – either themselves or with partners. On the other hand, we also see technology players, such as Treasury Prime, increasingly positioning themselves as “BaaS Operating System” for banks helping them to connect to and manage multiple fintech relationships.
Incidentally, things look somewhat different in Europe due to different licensing options; keep an eye on our upcoming research report in this space.
Open Banking in the US gets a boost with 1033
A few days before Money20/20 kicked off, the Consumer Financial Protection Bureau (CFPB) published the proposed rule 1033 on personal financial data rights. It is designed to “jumpstart competition and accelerate a shift toward open banking” by “requiring companies to share data at the person’s direction with other companies offering better products” and allowing people “to break up with banks that provide bad service”, while forbidding “companies that receive data from misusing or wrongfully monetizing the sensitive personal financial data.” Under the proposed rule, “people would have the power to share data about their use of checking and prepaid accounts, credit cards, and digital wallets”.
Not surprisingly, 1033 was on everyone’s lips at Money20/20. While some sections of the proposed rulemaking might still change following the consultation, Zach Perret, the CEO of Plaid, said on stage he was “thrilled there is clarity”. Of course, over the years, Plaid has become much more than an aggregator and facilitator of raw data and has been building out data-driven value-added services around payments, lending, and fraud. The proposed ruling implies that companies offering more than just mere access to raw data might be regulated as consumer reporting agencies under the FCRA (Fair Credit Reporting Act). There is no question that banks and their partners will be digesting implications as this rulemaking continues to evolve and gets finalized.
Generative AI: a (quiet?) revolution in productivity
Given the highly public buzz around GenAI over the last year or so, we might have expected to see GenAI dominating the agenda and the expo floor, and yet it wasn’t as visible. Sure, there were a few creative marketing tricks to attract foot traffic to booths – for example, Zeta had a camera that would take your picture and upload it into a GenAI tool to generate an image of you as a cowboy or a viking. A rather generous picture, I might add - see below.
However, the real work was happening behind the scenes, with many vendors working either on incorporating GenAI into their solutions or offering infrastructure and products for clients to build out their own use cases. For example, Featurespace announced the generative Large Transaction Model, TallierLTM, “a large-scale, self-supervised, pre-trained model designed to power the next generation of AI applications for the financial protection of consumers.” David Excell, the company’s founder expressed belief that “what OpenAI’s LLMs have done for language, TallierLTM will do for payments”.
We also had the opportunity to sit down with Microsoft at its AI Lounge “powered by Microsoft and NVIDIA.” The two companies announced earlier this year a collaboration focused on creating a secure, enterprise-ready platform that enables Azure customers worldwide to quickly build, deploy and manage customized applications using the NVIDIA AI frameworks and tools supported in the software layer of NVIDIA’s AI platform.
In a couple of days, on November 1st, enterprise customers will get access to Microsoft 365 Copilot, “your everyday AI companion” designed to increase the user productivity. Banks may not yet be ready to expose GenAI directly to customers but are certainly exploring use cases for increasing productivity of their employees, from developers to customer-facing staff.
Finally, I can’t close the blog on Money20/20 this year without mentioning the Sphere, the new immersive venue right next to the Venetian. “Have you been to the Sphere yet?” became probably the most frequent small talk opener of the event. Only the lucky few got to see the U2 playing live, but many of the rest of us went for the “Sphere Experience” to view Postcard from Earth, a specially commissioned film by the director Darren Aronofsky. And yes, it is worth the hype, it’s absolutely spectacular!
Thank you to Money20/20 for continuing to deliver the amazing event, and once again, thanks to all of you who met with us. We know that time at Money20/20 is a precious commodity, and we appreciate your generosity! For us, every conversation is valuable, as we get to know better what’s on your mind and how we can best serve you. We look forward to continuing the dialogue!